The Impact and Valuation of Off-Balance-Sheet Activities Concealed by Equity Method Accounting

Bauman, Mark P.

doi:10.2308/acch.2003.17.4.303

Cited by 40 publications

(28 citation statements)

References 9 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Liability disclosures relating to equity accounted investees have also been investigated by prior researchers, as such liabilities may represent hidden liabilities of the reporting entity (Baumann, 2003;O'Hanlon and Taylor, 2007). Baumann (2003) finds, for example, that investor-guaranteed obligations of equity accounted investments are negatively associated with the investor's market value, but does not distinguish between joint ventures and associates.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Baumann (2003) finds, for example, that investor-guaranteed obligations of equity accounted investments are negatively associated with the investor's market value, but does not distinguish between joint ventures and associates. Richardson et al (2012) confirm that liability disclosures of equity accounted joint ventures are value-relevant for a sample of Canadian joint ventures.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The first important contribution of this paper is that, in contrast to prior research (Baumann, 2003;O'Hanlon & Taylor, 2007, Richardson et al, 2012, disclosed fair values of listed associates are controlled for. As disclosed fair values should incorporate all available financial information relating to the listed associate, this is an important control variable.…”

Section: Contribution and Implications Of The Papermentioning

confidence: 99%

See 2 more Smart Citations

The value-relevance of disclosed summarised financial information of listed associates

Badenhorst

Brümmer

Wet

2015

Journal of International Accounting, Auditing and Taxation

View full text Add to dashboard Cite

Prior research considers limited elements of the summarised financial information disclosed for equity accounted associates under IAS 28. Moreover, prior research does not consider the collective or incremental value-relevance of these disclosures. This study investigates the incremental value-relevance of all the required elements of disclosed summarised financial information for listed associates and controls for disclosed fair values. Findings suggest that individual elements of disclosed summarised financial information are sometimes incrementally valuerelevant, but that the elements have the greatest incremental value-relevance as a group.These findings imply that investors value a firm's investments in listed associates at a self-developed intrinsic value, rather than using the market value (fair value) of that associate directly. By extension, underlying accounting information of listed associates remains value-relevant, even when alternative market-based valuations are available.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Contribution and Implications Of The Papermentioning

confidence: 99%

See 1 more Smart Citation

The value-relevance of disclosed summarised financial information of listed associates

Badenhorst

Brümmer

Wet

2015

Journal of International Accounting, Auditing and Taxation

View full text Add to dashboard Cite

show abstract

“…Studies on the value-relevance of proportionate consolidation figures or on the value relevance of disclosures of the venturer's share of JCE's liabilities provide additional evidence on this issue (e.g. Bauman, 2003;Stolzfus and Epps, 2005;O'Hanlon and Taylor, 2007). They document that a change to proportionate consolidation or the disclosure of JCE's liabilities would provide more value-relevant information, especially when the venturer guarantees the debt of the joint ventures.…”

Section: Debt Guaranteesmentioning

confidence: 99%

“…Graham et al, 2003;Stoltzfus and Epps, 2005;Bauman, 2007) or of the usefulness of additional information provided by venturers about their interests in joint ventures (e.g. Lim et al, 2003;Kothavala, 2003;Bauman, 2003;Soonawalla, 2005;O'Hanlon and Taylor, 2007).…”

Section: Introductionmentioning

confidence: 99%

Determinants of the Accounting Choice between Alternative Reporting Methods for Interests in Jointly Controlled Entities

Lourenço

Curto

2010

European Accounting Review

View full text Add to dashboard Cite

This paper examines whether the type of jointly controlled entity influences the management choice to report interests in this kind of joint venture using the equity method or proportionate consolidation. We address this gap in the accounting choice literature by exploiting the UK setting where, due to the transition to IFRS, firms had to change their reporting method for interests in jointly controlled entities from the gross equity method to a similar approach (equity method) or to proportionate consolidation. We support our analysis on the classification of jointly controlled entities proposed by Hennart (1988). We hypothesize that venturers are more likely to change their reporting method to proportionate consolidation when the majority of their jointly controlled entities are cases of Link instead of Scale cooperation. After controlling for several variables, our results are consistent with the predictions and thus suggest that the type of jointly controlled entity plays an important role in the management decision to report interests in jointly controlled entities using the equity method or proportionate consolidation. However, the results also provide empirical evidence supporting the importance of debt covenant costs and monitoring costs in the choice between alternative reporting methods.

show abstract

The accounting and market consequences of accelerated share repurchases

2011

View full text Add to dashboard Cite

We evaluate the representational faithfulness of the accounting treatment of a recent and well-established type of structured transaction-accelerated share repurchases (ASRs). ASRs are popular because accretive earnings per share benefits are recognized immediately, while any gains or losses on the forward contract used to execute an ASR bypass income, and are reported directly in equity. We document lower value relevance for the liabilities of ASR companies compared with a size-and industry-matched sample. ERC tests also indicate a market discount for the earnings of ASR companies compared with the control sample. Finally, we document significant abnormal returns to a trading strategy based on unrealized gains or losses on ASR transactions. Our results indicate that the current accounting for ASRs does not result in representative reporting of these transactions. As a result, financial statement users might benefit from recognition of ASR elements in financial statements.

show abstract

The Impact and Valuation of Off-Balance-Sheet Activities Concealed by Equity Method Accounting

Cited by 40 publications

References 9 publications

The value-relevance of disclosed summarised financial information of listed associates

The value-relevance of disclosed summarised financial information of listed associates

Determinants of the Accounting Choice between Alternative Reporting Methods for Interests in Jointly Controlled Entities

The accounting and market consequences of accelerated share repurchases

Contact Info

Product

Resources

About